A US FinCen leak shows JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon moved illicit funds for nearly two decades even after being prosecuted or convicted for financial misconduct.
HSBC and Standard Chartered's Hong Kong shares have dropped after it was reported that they and other banks moved large sums of allegedly illicit funds.
According to BuzzFeed and other media reports, despite red flags about the origins of the money, the banks moved the cash for nearly two decades.
The investigation, which was led by 108 international media outlets from 88 different countries, is based on thousands of suspicious activity reports (SARs) submitted to the US Treasury Department's financial law enforcement agency, FinCEN, by banks from around the world.
"These documents, compiled by banks, shared with the government, but kept from public view, expose the hollowness of banking safeguards, and the ease with which criminals have exploited them," wrote US outlet Buzzfeed News, in the introduction of its report.
The investigation points in particular to five major banks – JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon – accused of continuing to move assets of alleged criminals, even after being prosecuted or convicted for financial misconduct.
The revelations underscore challenges for regulatory and financial institutions trying to stop the flow of dirty money despite billions of dollars of investments and penalties imposed on banks in the past decade.
In a statement released prior to the investigation's publication, FinCEN said that the "unauthorized disclosure of SARs is a crime that can impact the national security of the United States."
HSBC shares in Hong Kong fell as much as 5.33 percent to HK$29.60 on Monday morning, the lowest since May 1995.
StanChart dropped as much as 6.18 percent to HK$35.80, the lowest since May 25 this year.
The Hang Seng Index was down 2.06%, the biggest daily percentage drop since July 24.
"The big banks ... are quite a meaningful weight in the index, and that the banks are going to be under such scrutiny (after the reports) is going be a big distraction for investors in this part of the world," said Jim McCafferty, head of equity research, Asia ex-Japan at Nomura in Hong Kong.
Violating US sanctions
HSBC and Standard Chartered, among other global banks, have paid billions of dollars in fines in recent years for violating US sanctions on Iran and anti-money laundering rules.
More than 2,100 SARs, which are in themselves not necessarily proof of wrongdoing, were obtained by BuzzFeed News and shared with the International Consortium of Investigative Journalists (ICIJ) and other media organisations.
The files contained information about more than $2 trillion worth of transactions between 1999 and 2017, which were flagged by internal compliance departments of financial institutions as suspicious.
The ICIJ reported the leaked documents were a tiny fraction of the reports filed with FinCEN.
The banks respond to claims
HSBC and StanChart were among the five banks that appeared most often in the documents, the ICIJ reported.
The SARs showed that banks often moved funds for companies that were registered in offshore havens, such as the British Virgin Islands, and did not know the ultimate owner of the account, the report said.
Staff at major banks often used Google searches to learn who was behind large transactions, it said.
In a statement to Reuters on Sunday, HSBC said, "All of the information provided by the ICIJ is historical." The bank said as of 2012, "HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime across more than 60 jurisdictions."
StanChart said in a statement, "We take our responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programmes."